Air Transport Markets Weaken in November

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Geneva – The International Air Transport Association (IATA) announced global traffic results for November showing a softening in passenger markets while air cargo markets remained weak compared to levels attained earlier in the year.

Passenger traffic was 4.3% above November 2010 levels but this is skewed as November 2010 was a particularly weak month. The softening in passenger markets becomes apparent when comparing to the previous month (October 2011). This shows a 0.5% decline on a seasonally-adjusted basis.

Freight markets were 3.1% below November 2010 levels despite a 1.1% increase on October 2011 performance.

“Weak global economic performance is being reflected in air transport markets. Freight markets have contracted some 4% compared to January. Although passenger markets have had some growth relative to the beginning of the year – about 2% – the trend has been both soft and volatile. Continuing economic uncertainty will likely mean market shortcomings deepening as we enter 2012,” said Tony Tyler, IATA’s Director General and CEO.

Globally, passenger load factors have fallen sharply to 76.3% from 78.5% in October. This shows that the weakness in passenger demand is outpacing airlines’ ability to adjust capacity accordingly. Regional differences are sharp. While North American carriers saw a 0.8% decline in travel, carriers in the Middle East experienced a 10.1% increase, followed by 9.0% for Latin American airlines.

Nov 2011 vs. Nov 2010

RPK Growth

ASK Growth

PLF

FTK Growth

AFTK Growth

International

4.0%

5.2%

74.6

-3.8%

1.9%

Domestic

4.7%

2.8%

79.2

2.0%

1.9%

Total Traffic

4.3%

4.3%

76.3

-3.1%

1.9%

YTD 2011 vs. YTD 2010

RPK Growth

ASK Growth

PLF

FTK Growth

AFTK Growth

International

6.9%

8.3%

77.5

-0.5%

5.3%

Domestic

4.2%

3.0%

79.4

-2.2%

-0.1%

Total Traffic

5.9%

6.3%

78.2

-0.7%

4.1%

International Passenger Markets

International travel markets continue to be weaker than domestic markets. Compared to October, international demand contracted by 1.5% while domestic demand grew by 1.3%.

International travel markets continue to be weaker than domestic markets. Compared to October, international demand contracted by 1.5% while domestic demand grew by 1.3%.

North American airlines saw international demand shrink by 1.2% (compared to November 2010), roughly in line with a 1.0% reduction in capacity. The fourth quarter uptick in the US economy has yet to be reflected in passenger markets.

Latin American and the Middle Eastern carriers recorded the strongest year-on-year growth at 8.8% and 9.8% respectively. For both regions, capacity increases outstripped the growth in demand with Middle Eastern carriers growing their capacity by 10.4% and Latin American carriers by 11.4%. Latin American economies have remained strong with robust trade activity. Middle Eastern airlines have seen a gain in market share on long-haul markets through price competitive products.

European airlines continued to face the weakest market outlook due to the uncertainty in the Euro-zone. Demand grew 4.9% compared to the previous November while capacity increased by 5.3%. This is a steep change from the 6.4% demand growth recorded for October on a capacity increase of 8.1%. Growth in travel has been supported by business travel on the back of export strength in economies such as Germany.

Asia-Pacific airlines reported 2.4% growth in year-on-year demand which is less than half the 5.4% growth in capacity. The region’s carriers recorded a load factor of 73.3%.

African carriers reported 2.6% growth in demand. While this is twice the 1.3% capacity expansion, the region still recorded the weakest load factors of 66.2%.

Domestic Passenger Markets

Overall domestic performance was better than that of international markets with 4.7% year-on-year growth in November and an average load factor of 79.2%. Sharp differences remained between the major markets:

US domestic demand fell by 0.8% (year-on-year). Capacity cuts of 3.4% resulted in the strongest load factor of 83.4%.

Chinese domestic demand showed the strongest year-on-year growth at 17.2%. This is in excess of the 13.3% growth in capacity and resulted in a load factor of 80.7%.

Demand in the Indian domestic market grew by 10.7%, which is well below the 17.3% expansion in capacity. Load factors stood at 76.8%.

Brazil recorded 9.4% year-on-year growth in demand which was relatively in line with the 10.3% increase in capacity. Load factors stood at 65.7% for the month.

The post-earthquake and tsunami recovery in the Japanese market stagnated in November. Demand was 10.7% below levels attained in the previous year. Despite capacity cuts of 9%, Japan still recorded the weakest domestic load factor at 65.4%.

Air Freight (Domestic and International)

Air freight markets continued their decline in line with weak economic performance and falling business confidence. International markets declined by 3.8%. This was offset by 2.0% growth in domestic markets. Nonetheless, system wide demand shrank by 3.1% in comparison with November 2010.

International freight load factors have declined 6 percentage points from their peak in mid-2010. While freighter capacity has been adjusted to meet demand, belly cargo capacity follows the trend in passenger demand.

Asia-Pacific carriers have seen the weakest demand performance driven by falling demand for Asian manufactured goods from US and European consumers. The region’s carriers saw the market decline by 6.4%. European carriers reported a 4.6% fall in demand reflecting continued uncertainty associated with the Euro-zone crisis. North American carriers’ operations were largely unchanged from the previous year with only 0.2% growth.

The Middle East and Latin American carriers delivered the strongest cargo performance with 4.6% and 4.0% growth respectively.

African carriers reported a 1.7% year-on-year decline.

The Bottom Line

“The year-end holiday season reminds us all of the importance of connectivity and how aviation is a force for good in the world. Global supply chains bring holiday goods to markets. Millions of people are reunited with family and friends. Millions more embark on journeys of discovery or rest and relaxation. Early in the New Year they will be joined by business travelers seeking to grow their businesses by exploring new markets opportunities,” said Tyler.

“This year the story of aviation’s importance is even more compelling as governments around the world seek solutions to economic uncertainty. Economic growth is the only durable solution. Aviation can be a catalyst for that growth. But that depends on governments allowing airlines to get on with the business of providing global connectivity. The New Year’s resolution for every government with respect to aviation should be to stop over-taxation or mis-regulation of this vital economic driver,” said Tyler.

IATA is estimating the airline industry will make a collective profit of $6.9 billion in 2011 for a net margin of 1.2%. IATA forecasts that this will fall to $3.5 billion in 2012 (0.6% net margin). But the association has warned that the downside risk of the Euro-zone crisis failing to be resolved could lead to losses in excess of $8 billion.

Domestic Markets: Domestic RPKs account for about 37.0% of the total market. It is most important for North American airlines as it is about 66.5% of their operations. In Latin America, domestic travel accounts for 47.3% of operations, primarily owing to the large Brazilian market. For Asia-Pacific carriers, the large markets in India, China and Japan mean that domestic travel accounts for 42.2% of the region’s operations. It is less important for Europe and most of Africa where domestic travel represents just 11.0% and 11.6% of operations respectively. And it is negligible for Middle Eastern carriers for whom domestic travel represents just 5.5% of operations.

Explanation of measurement terms:

RPK: Revenue Passenger Kilometers measures actual passenger traffic

ASK: Available Seat Kilometers measures available passenger capacity

PLF: Passenger Load Factor is % of ASKs used. In comparison of 2011 to 2010, PLF indicates point differential between the periods compared

FTK: Freight Tonne Kilometers measures actual freight traffic

AFTK: Available Freight Tonne Kilometers measures available total freight capacity

FLF: Freight Load Factor is % of AFTKs used

IATA statistics cover international and domestic scheduled air traffic for IATA member and non-member airlines.

All figures are provisional and represent total reporting at time of publication plus estimates for missing data. Historic figures may be revised.